(Recasts, updates prices, adds comment)
By Santosh Menon
LONDON, May 28 (Reuters) - Oil rose to near $130 a barrel on
Wednesday, rebounding from a sharp drop on signs Asian demand
could start to falter as consumer nations look to cut subsidies
by raising fuel prices.
U.S. crude <CLc1> was 66 cents up at $129.51 a barrel by
1430 GMT, off lows of $125.96 hit earlier in the session on top
of a $3.34 fall on Tuesday. U.S. crude hit a record high of
$135.09 last week.
London Brent crude <LCOc1> was $1.02 higher at $129.32 a
barrel.
"The bounce was more technical, with the sell-off a bit too
sharp and once again buyers have stepped in to buy the dips,"
said Addison Armstrong, director of market research at Tradition
Energy.
Oil has also been knocked off its peak by growing evidence
that consumers are struggling to cope with surging prices.
Demand for oil in top consumer the United States and other
developed countries has been under pressure for some time now,
and signs are emerging that it could spread across Asia as
governments in the region take the knife to subsidies.
"There are signs that soaring energy prices are now even
starting to cause ripples in the booming Asian economies," said
Edward Meir at MF Global.
Smaller Asian oil consumers such as Taiwan, Indonesia and
Sri Lanka have all recently raised domestic fuel prices, and
India is also poised for a modest increase.
Analysts, however, expect the impact of hikes to be limited,
saying that top Asian consumer and the world's second-largest
oil consumer, China, appears set to resist pressure to raise
rates until after the summer Olympics. []
Soaring fuel costs have triggered a wave of protests around
the world, with convoys of trucks converging on London on
Tuesday, while in France fishermen blocked road and rail access
to the fuel depot of the country's largest oil refinery at
Gonfreville, owned by Total.
DOLLAR EFFECT
Oil's rebound came as the dollar rallied after a report
showed that new orders for U.S. consumer goods for April fell
less-than-expected.
The U.S. greenback had also rallied on Tuesday after April
U.S. new-home data showed an unexpected rise, triggering a slide
in oil and other commodities bought by investors as a hedge
against inflation. []
Oil prices have jumped nearly 40 percent this year,
bolstered by a poor performing dollar as well as growing fears
about the industry's ability to keep pace with demand over the
next decade due to stagnating non-OPEC production growth.
Long-term fears have overshadowed relatively healthy
inventory levels in big consumers like the United States, where
crude stocks were expected to have risen by 100,000 barrels last
week while gasoline stocks dipped by the same volume. []
Inventories of distillates such as diesel and heating oil,
which have been the market's major driver due to robust demand,
were set to rise by 800,000 barrels, in line with seasonal
trends, a preliminary Reuters poll of analysts showed.
The data from the U.S. Energy Information Administration is
due on Thursday, a day later than usual due to the holiday.
(Additional reporting by Luke Pachymuthu in Singapore and
Robert Gibbons in New York; editing by James Jukwey)
